Daio Paper announces acquisition of pet product company Daiki to establish a material recycling model and strengthen revenue within home and personal care; Daiki supplies approximately 40% of the paper pellet cat litter market in Japan

August 16, 2022 (press release) –

We would like to hereby announce as follows that we have resolved at the meeting of the Board of Directors held today (August 12, 2022), to acquire all shares of DAIKI co. ltd., a company manufacturing pet care products (hereinafter, "Daiki") (hereinafter, the “Share Acquisition”), thereby making it one of our subsidiaries.  1. Reasons for Share Acquisition In the "Daio Group Sustainability Vision" announced in May 2021, our Group has established a purpose of achieving the "Three Lives", namely, hygiene, life, and regeneration, and realizing an "Abundant and Affable Future for the World". With an aim to contribute to the "Regeneration of the Earth" as stated in the Vision, we are working to solve social issues through our business activities. Such activities include a launching of a joint study on recycling of used disposable diapers in June 2022 (Note 1). We believe that, with this Share Acquisition, we will not only be able to establish a material recycling model within our Group but also concurrently realize the further strengthening of the revenue base of the Home & Personal Care business. Founded in 1984, Daiki is an OEM manufacturer and distributor of paper pellets cat litter used for cat excretion. It supplies approximately 40% of the paper pellets cat litter market in Japan through major domestic pet care product manufacturers. It manufactures high-quality paper pellets cat litter by utilizing recycled raw materials such as diapers, wallpaper and pulp-based non-woven fabrics that are below the standard of manufacturers. It has two production facilities in Japan, with products supplied promptly to eastern Japan from the Mooka production site in Tochigi Prefecture and to western Japan from the Shikoku production site in Kagawa Prefecture. Leveraging the know-how and patents obtained from years of experience, it has strength in developing the products that meet increasingly sophisticated and diverse needs, as well as in cost competitiveness. ENGLISH TRANSLATION FOR REFERENCE PURPOSE ONLY This notice is an English translation of the Japanese original dated August 12, 2022 issued by Daio Paper Corporation, and is for reference purpose only. In the event of any discrepancy between this translated document and the Japanese original, the Japanese original shall prevail.  2  While most of the production losses generated in the manufacturing process of sanitary paper, disposable diapers, sanitary products and surgical masks that our Group manufactures and sells have been returned to raw material processes for commercialization, those that cannot be reused have been sold as raw materials for recycling or used as fuel for our own boilers. With the Share Acquisition, we will be able to recycle such production losses within our Group, leading to establish material-recycling, which will enable us to strengthen the revenue and profit of the business through manufacturing and selling paper pellets cat litter to pet care product manufacturers. Furthermore, along with the contribution to the achievement of SDGs and realization of sustainable recycling society, we also aim to utilize pulp and polymers separated and recovered from our recycling business of used disposable diapers for paper pellets cat litter production. (Note 1) In June 2022, we agreed with LiveDo Corporation to engage in a joint study to separate and recover  pulp, polymers and plastics from used disposable diapers and recycle them as resources.